The U.S. District Court for the Eastern District of New York recently granted summary judgment in favor of a debt collector, holding that the debt collector did not violate the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA"), by reporting a debt as "deleted" rather than "disputed," and by asking probing questions in response to a call from the consumer disputing the debt.
In addition, the Court denied the plaintiff's motion for class certification on ascertainability grounds, holding that trying to decipher the debt collector's system notes summaries of its calls with the putative class members would not be administratively feasible.
A copy of the opinion is available at: Link to Opinion
In 2010, the plaintiff consumer switched phone services. The new phone service provider performed some work on the phone line in order to ensure adequate service, and charged the plaintiff $131 fee for such work. The consumer never paid the bill.
The defendant debt buyer acquired the debt from the phone company in July 2013. The debt buyer sent an initial collection letter and demanded payment for the debt. The letter was returned as undeliverable.
The consumer eventually called the debt buyer, and recorded his conversation with it. The consumer asked what he had to do to dispute the debt, but refused to answer any of the follow-up questions posed by the debt buyer.
The debt buyer marked the account as deleted following the call and instructed the major credit reporting agencies ("CRAs") to delete the information. On the same day, following the call, the debt buyer sent the consumer a letter "advising him that it had ceased collection efforts and had instructed the CRAs to delete the information" the debt buyer had furnished regarding the account.
The debt buyer reiterated the requests to the CRAs each month for three months, in accordance with its policies and procedures.
The consumer later received a credit report. The report showed the debt buyer's account as still due and owing, but also contained a disclaimer making it clear that it was not to be relied upon as a report from the three recognized CRAs.
The consumer filed suit against the debt buyer alleging four overlapping violations of the FDCPA, all of which essentially asserted false or misleading representations in connection with the collection of a debt.
The District Court first looked to the alleged violation of 15 U.S.C. §1692(e)(8) which states it is a violation of the FDCPA to communicate "credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed." The Court found there to be insufficient evidence in the record to this effect.
The consumer first argued that the credit report he received continued to list the debt buyer's debt. However, the consumer did not produce any evidence that any of the three major CRAs continued to report the debt.
In addition, the Court held that the FDCPA does not make a debt collector a guarantor of the CRAs' compliance with its furnishing requests, but rather that the debt collector only has to make the request to the CRAs.
The Court also noted that the FDCPA is not a device for a debtor to wipe out his debt. Instead, the Court held, "the purpose of the FDCPA, inter alia, is to place a halt, whether temporary or permanent, on collection efforts once a debtor alleges that a debt is not valid. It is not a device whereby a debtor can force a collection company to write down his debt to zero. It does not wipe out the debt. The collection company has to maintain the ability to, at least, file a proof of claim in bankruptcy if the debtor later seeks bankruptcy protection, as some do."
The plaintiff then argued that the account was marked as deleted, instead of disputed. However, the Court noted that the undisputed evidence showed that the "disputed" code allowed the debt buyer free to investigate the debt, and depending on the results of the investigation, to restore the account to undisputed status, while the "deleted" code identifies a disputed account as to which no further action is going to be taken. Accordingly, a "disputed" code is a step before a "deleted" code. The Court noted that the debt buyer merely skipped the "disputed" code as it was obvious that the $131 debt was going to be more trouble than it was worth.
The Court found no violation of the FDCPA's credit reporting accuracy provisions at 15 U.S.C. §1692(e)(8) as the debt buyer did all it was required to do in response to the consumer's dispute.
The Court then looked to the alleged violation of 15 U.S.C. §1692e(10). This subsection prohibits a debt collection from using any false representation or deceptive means to collect or attempt to collect any debt.
The plaintiff argued that the debt buyer violated the provision by "asking too many questions when he called to dispute his debt," and thus the least sophisticated consumer could have been deceived into believing that he had to provide the defendant with a valid reason to dispute his debt.
The Court reviewed the transcript of the call between the plaintiff and the debt buyer, that the plaintiff recorded. The Court found it obvious that the plaintiff was evading questions and harassing the collection agent. The plaintiff did not do what the least sophisticated consumer would do. The Court noted that the least sophisticated consumer would simply state that the phone company did not tell him they would be charged a service fee and that he refused to pay it.
The Court found that neither the debt buyers policies nor anything said in the telephone call prevented the plaintiff from disputing the debt. The debt buyer still marked the account as deleted and requested that the CRAs delete its reported information. The Court also held that the questions asked did not violate the FDCPA.
The plaintiff further alleged that the letter in which debt buyer advised him that it was ceasing collection efforts and reporting the debt as deleted to the CRAs was a false representation under 15 U.S.C. §§ 1692e(2)(A) and 1692e(10) because, in fact, the debt buyer did not cease collection efforts and did not advise the CRAs to delete the debt.
However, as discussed above, the Court found that the record demonstrates that the debt buyer properly notified the CRAs that the plaintiff's debt was disputed and ceased collection activities. Accordingly, the Court rejected these allegations also.
Lastly, the plaintiff alleged that the debt buyer violated 15 U.S.C.§ 1692e(2)(a), which makes it a violation to falsely represent the legal status of a debt.
However, the Court held that, as long as the debt collector has included appropriate language notifying the consumer about the debt validation procedure under the FDCPA (15 U.S.C. § 1692g), an allegation that the debt is invalid cannot alone constitute the basis for an FDCPA claim.
The Court found that the debt buyer did not violate the FDCPA by attempting to collect on the debt prior to verifying it. The Court noted that the phone company represented the amount of the debt was $131.21, and the debt buyer's initial letter to the plaintiff provided adequate notice of how to dispute the debt. Moreover, the Court noted that after the plaintiff disputed the debt, the debt buyer was placed on notice to cease collection or verify the debt, but the debt buyer had no obligation to independently investigate the debt prior to collection.
The Court then discussed class certification of the putative class. The plaintiff proposed either a nationwide or a New Yorkonly class which he defined as follows: "All persons who, according to Defendants' records (a) have a United States mailing address; (b) within one year before the filing of this action; (c) verbally disputed the debt; and (d) were asked probing questions regarding the reason for the dispute."
As you may recall, Fed. R. Civ. Pro 23 requires a proposed class to have numerosity, commonality, typicality, and adequacy of the representative. A class must also be ascertainable.
The Court found two essential issues with the plaintiff's proposed class.
First, the Court held that ascertainability requires a class to be sufficiently definite in order that it is administratively feasible for the court to determine whether a particular individual is a member.
The Court found that the plaintiff's proposed class definition would require a two-step process: (a) first, to find the consumers to whom the debt buyer assigned a certain code within a year; and (b) then, to determine which of the consumers were asked probing questions.
In this case, the plaintiff recorded the conversation and the Court was able to review the transcript. However, the Court noted that in most cases, the debt buyer merely maintains notes on their system of the communication. Thus, the Court noted that each of the notes would have to be reviewed individually to ascertain class membership and it would be difficult to even tell if probing questions were asked based on the notes. In addition, the Court noted that the plaintiff's use of the term "probing" was not defined and it would require a case-by-case inquiry to determine which questions have an improper deterrent effect and which do not.
Thus, the Court held that the proposed class would be unascertainable.
Next, the Court recited that adequacy of the representative requires the named plaintiff to show there is no conflict of interest between the named plaintiff and the other members of the class, and that class certification is inappropriate where a putative class representative is subject to unique defenses which threaten to become the focus of litigation.
Here, the plaintiff faced a defense unique to him – i.e., the Court believed the plaintiff would be subject to the argument that his FDCPA claims should be rejected due to his attempt to entrap the collection agent into violating the statute. This the Court held made the plaintiff an inadequate class representative.
Accordingly, the Court granted the debt buyer's motion for summary judgment and denied the plaintiff's motion for class certification.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@MauriceWutscher.com
Admitted to practice law in Illinois
Alabama | California | Florida | Georgia | Illinois | Indiana | Maryland | Massachusetts | New Jersey | New York | Ohio | Pennsylvania | Texas | Washington, DC
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
and
The Consumer Financial Services Blog™
and
and
California Finance Law Developments
and
